How is austerity doing in Europe

[Norman]

I don't understand where this 'printing money' meme comes from. All government spending is 'printing money' under a fiat system, regardless of tax revenue or bond sales. The government needs to spend money into existence through spending before we can obtain it.

Well this is certainly an interesting definition. But it's a pretty stupid one. To say government is printing money, it is meant that they are INCREASING the money supply. Tax and spend do not increase the money supply. While printing money does.

But it doesn't matter what definitions you use. What is important is important is that when referring to printing money I mean NET creation of money supply. Not simply government spending, which can be funded with taxing as well. (although I view inflation as a tax).

As I tried to explain, the 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED. We can look at it another way: the US deficit simply reflects the public's desire to save. Basically, if the the public wishes to save, then budget deficts have to occur as a basic accounting identity. The 'US debt' is the stock of its aggregate deficits which are equal, down to the last penny, to the stock of its net financial assets held by the domestic private sector.

Not true. It takes two to tango. It takes two to create government debt. If government weren't issuing debt there would be no debt. Besides that, the deficit is largerly founded by other nations. In any case you can save without having a government deficit.

And FED printing bunch of money and buying up bonds has nothing to do with willingness of public to save either.

Again China and other nations own these treasuries too, US has a trade deficit in addition to federal deficit. BOTH are a problem. The debt is an asset yes, but like all assets it can be viped out if government simply decides to default (or inflate the currency).


You would have to be crazy to burrow USA at 2% when you can burrow someone like swizerland or australia for BETTER interest rate. Even though those countries are safer and their currencies most likely will raise against the US dollar. That about tells how much the central banks manipulate the US debt market and how overvalued the dollar is.

You also seem inordinately preoccupied with the US trade deficit. The trade deficit is actually a positive and has enabled Americans to enjoy a tremendous standard of living, but that's another story.

True, but increased consumer spending in the prior years, means harder times ahead. You seem to think the future is all dandy, because of money printer can fix this shortfall! I think not. I especially oppose how the government has encuraged everyone to blow this money, by low interest rates and good old overspending.

There isn't an entitlement bomb. Congress can guarantee these programs into perpetuity through legislation, similar to Medicare Parts B and D. The only problem going forward, as you pointed out, is that of inflation. The US government can create any amount of dollars it so desires. The issue going forward is if that spending will result in a sufficient quantity of the real assets required for retirees. Real assets are food, shelter, medical care, etc. that are needed by to sustain them during retirement. As long as the US has real stuff, the paying for it part is easy, it's a matter of the government cutting checks. As long as the supply of real goods and services increases in tandem with the amount of checks being sent out, there is no inflationary risk whatsoever.

However, I will concede, if the US government does spend more than the amount of real goods and services being produced, then we'll have an inflation problem. This is the only threat to entitlements in the future.

[/QUOTE]

Yes, they can guarantee that every retiree gets the nominal value, but since the dollar has to be inflated to do this, in real terms they do not get anything. The real value is what matters to retirees. There is no way that production could ever increase as fast as the checks being sent out, not even according to the official predictions that have always been rosy and unable to predict recessions. Second problem is as you tax and inflate more, the opposite what you think happens, productivity goes down. More people join the unemployment bandwagon. Further more you are completely forgetting about opportunity costs! So even IF everything turns out all good (doubt it), it would have turned out much better without this turd.

Plus there is going to have to be a recession if the trade deficit is ever to be corrected. That is needed to allocate labor in USA more productively to create goods that can actually be sold overseas. The retirement bomb is very real, but how big of an explosion will it be? Dunno, but some people assets will get wiped for sure. Retirement WILL be cut most likely.

 

[Kimura]

This no longer applies because we now use fiat as opposed to convertible currencies.

As I said, when asked by Ron Paul, Bernanke said he operated the Fed as if it was on a gold standard!! A fiat system is not a libturd free lunch system. The liberal government can print and spend trillions and trillions and it won't help to invent one new product or improve our standard of living one tiny bit. Is that really over your head?? What it will do is create mal investment bubbles that will distort the economy and slow growth or cause recessions or depressions. Once again dear there is no free lunch!! Why not write that 100 times
and see if it sinks in???

Ron Paul doesn't understand the monetary system. The guy is so out to lunch, he even ignores some of the theories of von Mises he parrots as if some divine libertarian truth. Bernake was being grilled by Ron Paul, he explained why the FED was created, how LSAPs function, etc. He then obsesses over gold to which Bernanke tries to explain tail risk to him. It's like talking to the wall, the guy thinks gold is money as opposed to a precious metal.

Secondly, your comments make no sense. I never mentioned a free lunch, that absurd. You don't seem to understand what a social unit account or means of exchange entails.
What does entrepreneurship have to do with monetary operations, Ed? We could go back to tally sticks and people would still conduct business transactions.

Lastly, the Austrian Business Cycle is problematic at best. I see you parroting terms like 'malinvestment' and 'bubbles'. Similar to Ron Paul, you probably think a few axioms by a dead sociologist contain some universal metaphysical truths.

 

[EdwardBaiamonte]

This no longer applies because we now use fiat as opposed to convertible currencies.

As I said, when asked by Ron Paul, Bernanke said he operated the Fed as if it was on a gold standard!! A fiat system is not a libturd free lunch system. The liberal government can print and spend trillions and trillions and it won't help to invent one new product or improve our standard of living one tiny bit. Is that really over your head?? What it will do is create mal investment bubbles that will distort the economy and slow growth or cause recessions or depressions. Once again dear there is no free lunch!! Why not write that 100 times
and see if it sinks in???

Ron Paul doesn't understand the monetary system.

too stupid!! you debate by changing the subject!! I didn't say Ron Paul understood the monetary system. I said Bernanke said he managed the Fed as if it was on a gold standard system!!!

 

[EdwardBaiamonte]

Secondly, your comments make no sense. I never mentioned a free lunch, that absurd. You don't seem to understand what a social unit account or means of exchange entails.

too stupid!! You debate by changing the subject!! You said debt and deficits were wonderful. I explained how they caused mal investment distortion recessions and depressions. I then asked you if debt and deficits improved our standard of living and you of course changed the subject!!! Once again dear, do deficits and debt invent new products and improve our standard of living or do they do the opposite?? Try to follow along and not change subject!!

 

[EdwardBaiamonte]

Lastly, the Austrian Business Cycle is problematic at best. I see you parroting terms like 'malinvestment' and 'bubbles'. Similar to Ron Paul, you probably think a few axioms by a dead sociologist contain some universal metaphysical truths.

too stupid!! Let me simplify for you. If our soviet government took 70% of GNP to spend in taxes or printed 70% of GNP in fiat money to spend would it improve our standard of living as opposed to taking only 10%.

Try to answer the question rather than change the subject!! You need to face your ignorance. Sorry!!

 

[Kimura]

Well this is certainly an interesting definition. But it's a pretty stupid one. To say government is printing money, it is meant that they are INCREASING the money supply. Tax and spend do not increase the money supply. While printing money does.

But it doesn't matter what definitions you use. What is important is important is that when referring to printing money I mean NET creation of money supply. Not simply government spending, which can be funded with taxing as well. (although I view inflation as a tax).

Under a fiat system spending precedes taxation and borrowing. This is the operation reality of how it works. If the government sector constantly ran a balanced budget, whereby spending was equal to tax revenue, the domestic private sector would have net financial wealth of absolute zero. If the government runs constant budget surpluses (spending less than it total tax receipts), the domestic private sector’s net financial wealth would be negative. In other words, the domestic private sector would be in deficit and in debt to the public sector. We are no longer on a gold standard, you'relooking at this all wrong.

Are you familiar with the concept of high powered money or base money?

Not true. It takes two to tango. It takes two to create government debt. If government weren't issuing debt there would be no debt. Besides that, the deficit is largerly founded by other nations. In any case you can save without having a government deficit.

Well, I actually agree. We technically don't need Treasuries anymore under a fiat system, but the whole process has been hijacked by politicians. Yes, it takes two two tango: for every liability, there is a corresponding asset. Let's look at it a third way: those federal liabilities are assets to the public.

And FED printing bunch of money and buying up bonds has nothing to do with willingness of public to save either.

Well...Treasury auctions are always oversubscribed, meaning there's more buyers than available paper. Countries like China are lining up to buy US paper even at historically low rates. Why?

Again China and other nations own these treasuries too, US has a trade deficit in addition to federal deficit. BOTH are a problem. The debt is an asset yes, but like all assets it can be viped out if government simply decides to default (or inflate the currency).

Here's my post on trade deficits:
http://www.usmessageboard.com/economy/272160-top-ten-trade-deficit-partners-3.html#post6925096

You would have to be crazy to burrow USA at 2% when you can burrow someone like swizerland or australia for BETTER interest rate. Even though those countries are safer and their currencies most likely will raise against the US dollar. That about tells how much the central banks manipulate the US debt market and how overvalued the dollar is.

By the way, what country are you from? Just curious. I know you said you weren't from the US.

Yes, they can guarantee that every retiree gets the nominal value, but since the dollar has to be inflated to do this, in real terms they do not get anything. The real value is what matters to retirees. There is no way that production could ever increase as fast as the checks being sent out, not even according to the official predictions that have always been rosy and unable to predict recessions. Second problem is as you tax and inflate more, the opposite what you think happens, productivity goes down. More people join the unemployment bandwagon. Further more you are completely forgetting about opportunity costs! So even IF everything turns out all good (doubt it), it would have turned out much better without this turd.

Plus there is going to have to be a recession if the trade deficit is ever to be corrected. That is needed to allocate labor in USA more productively to create goods that can actually be sold overseas. The retirement bomb is very real, but how big of an explosion will it be? Dunno, but some people assets will get wiped for sure. Retirement WILL be cut most likely.

Inflation doesn't have to occur so long as there is a increase in real goods and services with the money supply. Currency isn't static, nor does it exist in a vacuum. Inflation is a normal part of a healthy economy. My concern is wages and unemployment. Wages have been stagnant in the US for a long time.

 

[Kimura]

This no longer applies because we now use fiat as opposed to convertible currencies.

As I said, when asked by Ron Paul, Bernanke said he operated the Fed as if it was on a gold standard!! A fiat system is not a libturd free lunch system. The liberal government can print and spend trillions and trillions and it won't help to invent one new product or improve our standard of living one tiny bit. Is that really over your head?? What it will do is create mal investment bubbles that will distort the economy and slow growth or cause recessions or depressions. Once again dear there is no free lunch!! Why not write that 100 times
and see if it sinks in???

Ron Paul doesn't understand the monetary system.

too stupid!! you debate by changing the subject!! I didn't say Ron Paul understood the monetary system. I said Bernanke said he managed the Fed as if it was on a gold standard system!!!

Okie dokie. He may have said that, but the reality is quite different. When the financial crisis struck, the federal government created one trillion dollars in one day out of thin air. How would you do that on a gold standard? < ------- trick question or is it?

Also, the FED has engaged in large scale asset purchases since 2008. How would you do that on a gold standard? <-------trick question or is it?

The point is, the FED isn't managed like it's on a gold standard, nor can it be on the monetary side at this point, given the fact we're no longer on a convertible currency.

 

[Kimura]

deficits create net financial assets under a fiat system. :

and does this improve our standard of living??????????????????

Isn't thinking fun?? Are you going to try to change the subject again or are you going to answer the question????

I've only explained it ten times, Ed, including the Canada thread. Do you want me to explain it an eleventh time? I can only articulate a concept so many times before it becomes a waste of time.

 

[Kimura]

Yes, there is no entitlement bomb, because US can just print money to pay the retirees, without even an opportunity cost. Even if there is going to be a ratio of 3:1 retirees to working population(purely hypothetical) the retirees having no savings; The magical act of printing money will save the day because it will stimulate the remaining working people with monetary steroids, making them 1000% more productive even as they get to keep less and less of their incomes, having to pay for the retirees.

Wait what?

Seriously, you need to think these in real terms a bit more. In your universe printing money can solve any problem, and nominally it may actually do just that. But not in real terms. People live in real world not in the nominal one. The retirees may get their money, but it won't be able to buy much as productivity won't keep up.

Same can be said of the debt problem. The debt of USA's is very real, every month about 45 billion worth of products get net imported. And worst of all it's used to fund mostly consumer spending and service industries that can not help the debt down in the future. Inflating the goverment debt away is not as easy as it sounds either, the investors are not THAT stupid, even though the extremely overvalued dollar could tell otherwise. One day it might just prick like any bubble.

I don't understand where this 'printing money' meme comes from. All government spending is 'printing money' under a fiat system, regardless of tax revenue or bond sales. The government needs to spend money into existence through spending before we can obtain it.

As I tried to explain, the 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED. We can look at it another way: the US deficit simply reflects the public's desire to save. Basically, if the the public wishes to save, then budget deficts have to occur as a basic accounting identity. The 'US debt' is the stock of its aggregate deficits which are equal, down to the last penny, to the stock of its net financial assets held by the domestic private sector.

You also seem inordinately preoccupied with the US trade deficit. The trade deficit is actually a positive and has enabled Americans to enjoy a tremendous standard of living, but that's another story.

There isn't an entitlement bomb. Congress can guarantee these programs into perpetuity through legislation, similar to Medicare Parts B and D. The only problem going forward, as you pointed out, is that of inflation. The US government can create any amount of dollars it so desires. The issue going forward is if that spending will result in a sufficient quantity of the real assets required for retirees. Real assets are food, shelter, medical care, etc. that are needed by to sustain them during retirement. As long as the US has real stuff, the paying for it part is easy, it's a matter of the government cutting checks. As long as the supply of real goods and services increases in tandem with the amount of checks being sent out, there is no inflationary risk whatsoever.

However, I will concede, if the US government does spend more than the amount of real goods and services being produced, then we'll have an inflation problem. This is the only threat to entitlements in the future.

dear, with the Fed balance sheet now well over 3 trillion it is a huge concern that many fear Bernanke cant resolve without a huge inflation!!

Really? Why is that? I want you to articulate to me why the FED can't change the composition of its balance sheet without causing 'inflation'. I want you to explain it in your own words, not some copy/paste job from the Wall Street Journal or wherever.

 

[EdwardBaiamonte]

I don't understand where this 'printing money' meme comes from. All government spending is 'printing money' under a fiat system, regardless of tax revenue or bond sales. The government needs to spend money into existence through spending before we can obtain it.

As I tried to explain, the 'US debt' is nothing more than the US economy's total holdings, in terms of savings accounts, at the FED. We can look at it another way: the US deficit simply reflects the public's desire to save. Basically, if the the public wishes to save, then budget deficts have to occur as a basic accounting identity. The 'US debt' is the stock of its aggregate deficits which are equal, down to the last penny, to the stock of its net financial assets held by the domestic private sector.

You also seem inordinately preoccupied with the US trade deficit. The trade deficit is actually a positive and has enabled Americans to enjoy a tremendous standard of living, but that's another story.

There isn't an entitlement bomb. Congress can guarantee these programs into perpetuity through legislation, similar to Medicare Parts B and D. The only problem going forward, as you pointed out, is that of inflation. The US government can create any amount of dollars it so desires. The issue going forward is if that spending will result in a sufficient quantity of the real assets required for retirees. Real assets are food, shelter, medical care, etc. that are needed by to sustain them during retirement. As long as the US has real stuff, the paying for it part is easy, it's a matter of the government cutting checks. As long as the supply of real goods and services increases in tandem with the amount of checks being sent out, there is no inflationary risk whatsoever.

However, I will concede, if the US government does spend more than the amount of real goods and services being produced, then we'll have an inflation problem. This is the only threat to entitlements in the future.

dear, with the Fed balance sheet now well over 3 trillion it is a huge concern that many fear Bernanke cant resolve without a huge inflation!!

Really? Why is that? I want you to articulate to me why the FED can't change the composition of its balance sheet without causing 'inflation'. I want you to explain it in your own words, not some copy/paste job from the Wall Street Journal or wherever.

dear, do you think inflation is a thing of the past or something? There are plenty of people around like Bernie Sanders and paul Krugman who are only concerned with the employment part of the mandate!!


No country has ever had a comparable increase in the size of its portfolio and unwound it “in the precisely analogous way,” Bernanke said in response to questions from members of the House Financial Services Committee. Japan was the only nation to use asset purchases, or quantitative easing, before the U.S. and is “still in that situation,” he said.

 

[Oldstyle]

So basically you are saying US can wave the magic wand and print that 1 trillion of money a year instead of going into debt. And there is not going to be a slightest difference. Not even an opportunity cost of not being able to print more money.

So basically, Fed is magic.

In fact let's get rid of all taxes and just print the money to opereate the government. And print some more to make the entitlement bomb vanish. What, there are poor and sick people? PRINT!

Exactly! Let's use a little common sense!!! Just because a government has a printing press in the basement doesn't mean that they then have unlimited amounts of money to spend. It scares me to death that Kimura actually seems to believe what he's saying. Is that what's being taught in economics classes these days? No wonder the college kids are voting for Barry!

For the umpteenth time, all government spending is 'printing money'. This is how a fiat monetary system operates, we're no longer on a gold standard, but people seem to be under the mistaken impression we are for some reason. I'm simply trying clear up the misconceptions, falsehoods and out right lies being told to the general public by various talk radio and media douchebags.

Just because we are no longer on the gold standard doesn't mean that we can simply print dollars to pay our bills with no consequences. We are borrowing trillions of dollars that we then spend to run the bloated, mismanaged mess that is our Federal Government...and we are obligated to repay that money plus interest to the people who have loaned it to us. The difference between a bank "savings account" and what we are doing is that a bank takes people's money at a low interest rate and turns around and puts that money on the street at a higher interest rate. Government doesn't DO that! They borrow money to spend it. When they spend it...it's GONE!!! This concept of yours that the money still exists...only in a different account is laughable.

 

[Kimura]

Just because we are no longer on the gold standard doesn't mean that we can simply print dollars to pay our bills with no consequences.

Again, with this 'printing money' meme. We're under a fiat system, a non-convertible currency, which means taxes effectively drive money. Under our system, all government spending is inherently money printing.

We are borrowing trillions of dollars that we then spend to run the bloated, mismanaged mess that is our Federal Government...and we are obligated to repay that money plus interest to the people who have loaned it to us.

The US government doesn't have to borrow that which it creates. This is another misconception. Government spending precedes taxation and borrowing, so the government simply taxes and borrows what it has already spent so to speak. I used the example about the Chinese or OPEC countries purchasing Treasuries. In order to purchase Treasuries, foreign countries or you or I have to use dollars, correct? Well....where did those dollars come from? The government has to spend them into existence at some point which is where deficit spending comes into play. Deficit spending creates net financial assets.

The difference between a bank "savings account" and what we are doing is that a bank takes people's money at a low interest rate and turns around and puts that money on the street at a higher interest rate. Government doesn't DO that! They borrow money to spend it. When they spend it...it's GONE!!! This concept of yours that the money still exists...only in a different account is laughable.

There fundamentally isn't a difference between a US Treasury and savings account. You deposit dollars, you are given back the principal plus accrued interest. Governments, such as the US, which is the monopoly issuer of the currency, doesn't have to borrow from anyone. From a monetary standpoint, this makes absolutely zero sense, given that we're off the gold standard. These are myths which are largely promulgated by right wing ideologues or grossly or willfully misinformed media pundits. You can print out my posts and bring them to the most hardcore, right wing economist on earth and they will grudgingly admit that I'm correct from the monetary side of things.

 

[Kimura]

dear, with the Fed balance sheet now well over 3 trillion it is a huge concern that many fear Bernanke cant resolve without a huge inflation!!

Really? Why is that? I want you to articulate to me why the FED can't change the composition of its balance sheet without causing 'inflation'. I want you to explain it in your own words, not some copy/paste job from the Wall Street Journal or wherever.

dear, do you think inflation is a thing of the past or something? There are plenty of people around like Bernie Sanders and paul Krugman who are only concerned with the employment part of the mandate!!

No country has ever had a comparable increase in the size of its portfolio and unwound it &#8220;in the precisely analogous way,&#8221; Bernanke said in response to questions from members of the House Financial Services Committee. Japan was the only nation to use asset purchases, or quantitative easing, before the U.S. and is &#8220;still in that situation,&#8221; he said.

Well, that makes sense, since unemployment is far more serious than some inflation, which I went into like ten different times. And yes, I read the transcripts, but people fail to realize multiple factors, such as that these things can be unwound over a period of 3-12 years if need be. The FED simply created bank reserves to accomplish these LSAPs, so I don't see a problem going forward.

 

[Oldstyle]

Just because we are no longer on the gold standard doesn't mean that we can simply print dollars to pay our bills with no consequences.

Again, with this 'printing money' meme. We're under a fiat system, a non-convertible currency, which means taxes effectively drive money. Under our system, all government spending is inherently money printing.

We are borrowing trillions of dollars that we then spend to run the bloated, mismanaged mess that is our Federal Government...and we are obligated to repay that money plus interest to the people who have loaned it to us.

The US government doesn't have to borrow that which it creates. This is another misconception. Government spending precedes taxation and borrowing, so the government simply taxes and borrows what it has already spent so to speak. I used the example about the Chinese or OPEC countries purchasing Treasuries. In order to purchase Treasuries, foreign countries or you or I have to use dollars, correct? Well....where did those dollars come from? The government has to spend them into existence at some point which is where deficit spending comes into play. Deficit spending creates net financial assets.

The difference between a bank "savings account" and what we are doing is that a bank takes people's money at a low interest rate and turns around and puts that money on the street at a higher interest rate. Government doesn't DO that! They borrow money to spend it. When they spend it...it's GONE!!! This concept of yours that the money still exists...only in a different account is laughable.

There fundamentally isn't a difference between a US Treasury and savings account. You deposit dollars, you are given back the principal plus accrued interest. Governments, such as the US, which is the monopoly issuer of the currency, doesn't have to borrow from anyone. From a monetary standpoint, this makes absolutely zero sense, given that we're off the gold standard. These are myths which are largely promulgated by right wing ideologues or grossly or willfully misinformed media pundits. You can print out my posts and bring them to the most hardcore, right wing economist on earth and they will grudgingly admit that I'm correct from the monetary side of things.

You just pointed out the difference! A bank isn't spending money it doesn't have. It's taking the money that is deposited into savings accounts and loaning that money out at a higher rate than what they are paying in interest. The Federal Government on the other hand IS spending money it doesn't have. They aren't investing that money by loaning it back out...they are spending it and it's gone...yet they still owe that money plus interest from the people that have bought Treasury notes. If a bank attempted to do what the Federal Government does they would be out of business in short order and it's officers would be facing jail time.

 

[Norman]

Under a fiat system spending precedes taxation and borrowing. This is the operation reality of how it works. If the government sector constantly ran a balanced budget, whereby spending was equal to tax revenue, the domestic private sector would have net financial wealth of absolute zero. If the government runs constant budget surpluses (spending less than it total tax receipts), the domestic private sector&#8217;s net financial wealth would be negative. In other words, the domestic private sector would be in deficit and in debt to the public sector. We are no longer on a gold standard, you'relooking at this all wrong.

Not true, central banks can buy any assets they want in a fiat standard. Central bank doesn't HAVE TO BUY public debt. I don't understand what you mean by domestic financial wealth, sounds completely irrelevant, again some completely different definition than what I am used to.

Are you familiar with the concept of high powered money or base money?

Yes I am, and this has NOTHING TO DO WITH THE TOPIC AT ALL!

Well, I actually agree. We technically don't need Treasuries anymore under a fiat system, but the whole process has been hijacked by politicians. Yes, it takes two two tango: for every liability, there is a corresponding asset. Let's look at it a third way: those federal liabilities are assets to the public.

Exactly, FINALLY YOU UNDESTAND OMG! And yes you are entirely correct those treasuries are assets to private sector, if they weren't there would be no problem, govt could default and nothing would happen!

Now, if govt defaults all those assets are wiped clean! Same for promised retirements.

Well...Treasury auctions are always oversubscribed, meaning there's more buyers than available paper. Countries like China are lining up to buy US paper even at historically low rates. Why?

Do you have any data to back this up? I think fed is doing most the buying. But hey, there can very well be idiot investors who think this is a good deal. A lot of people bought houses as well in the housing bubble, although I got to admit the math wasn't as easy as this is. In any case bubbles won't usually go on forever. At some point people sober up!



Here's my post on trade deficits:
http://www.usmessageboard.com/economy/272160-top-ten-trade-deficit-partners-3.html#post6925096

You would have to be crazy to burrow USA at 2% when you can burrow someone like swizerland or australia for BETTER interest rate. Even though those countries are safer and their currencies most likely will raise against the US dollar. That about tells how much the central banks manipulate the US debt market and how overvalued the dollar is.

Inflation doesn't have to occur so long as there is a increase in real goods and services with the money supply. Currency isn't static, nor does it exist in a vacuum. Inflation is a normal part of a healthy economy. My concern is wages and unemployment. Wages have been stagnant in the US for a long time.

Yes well, I don't think you replied my criticism. But you are correct, there is just little reason to expect such enermous increases in real goods and services to offset any inflation. And the opportunity cost of this is always there. If government prints to pay the retirees, it can't print to pay the schools or whatever else. Considering US government is burrowing like 30c? on a dollar currently...

Real wages on the other hand are definitely not going to raise as people will get taxed more to pay retirees and debt and all sorts of other things. Wages get cut if something.

 

[EdwardBaiamonte]

Really? Why is that? I want you to articulate to me why the FED can't change the composition of its balance sheet without causing 'inflation'. I want you to explain it in your own words, not some copy/paste job from the Wall Street Journal or wherever.

dear, do you think inflation is a thing of the past or something? There are plenty of people around like Bernie Sanders and paul Krugman who are only concerned with the employment part of the mandate!!

No country has ever had a comparable increase in the size of its portfolio and unwound it “in the precisely analogous way,” Bernanke said in response to questions from members of the House Financial Services Committee. Japan was the only nation to use asset purchases, or quantitative easing, before the U.S. and is “still in that situation,” he said.

Well, that makes sense, since unemployment is far more serious than some inflation, which I went into like ten different times. And yes, I read the transcripts, but people fail to realize multiple factors, such as that these things can be unwound over a period of 3-12 years if need be. The FED simply created bank reserves to accomplish these LSAPs, so I don't see a problem going forward.

you don't but Bernanke does becuase the situation is 100% new. To say there is no problem is pure ignorance as if to say the problems of central banking are behind us. How stupid when we just had a near depression and total collapse 5 years ago!!

 

[Kimura]

Just because we are no longer on the gold standard doesn't mean that we can simply print dollars to pay our bills with no consequences.

Again, with this 'printing money' meme. We're under a fiat system, a non-convertible currency, which means taxes effectively drive money. Under our system, all government spending is inherently money printing.



The US government doesn't have to borrow that which it creates. This is another misconception. Government spending precedes taxation and borrowing, so the government simply taxes and borrows what it has already spent so to speak. I used the example about the Chinese or OPEC countries purchasing Treasuries. In order to purchase Treasuries, foreign countries or you or I have to use dollars, correct? Well....where did those dollars come from? The government has to spend them into existence at some point which is where deficit spending comes into play. Deficit spending creates net financial assets.

The difference between a bank "savings account" and what we are doing is that a bank takes people's money at a low interest rate and turns around and puts that money on the street at a higher interest rate. Government doesn't DO that! They borrow money to spend it. When they spend it...it's GONE!!! This concept of yours that the money still exists...only in a different account is laughable.

There fundamentally isn't a difference between a US Treasury and savings account. You deposit dollars, you are given back the principal plus accrued interest. Governments, such as the US, which is the monopoly issuer of the currency, doesn't have to borrow from anyone. From a monetary standpoint, this makes absolutely zero sense, given that we're off the gold standard. These are myths which are largely promulgated by right wing ideologues or grossly or willfully misinformed media pundits. You can print out my posts and bring them to the most hardcore, right wing economist on earth and they will grudgingly admit that I'm correct from the monetary side of things.

You just pointed out the difference! A bank isn't spending money it doesn't have. It's taking the money that is deposited into savings accounts and loaning that money out at a higher rate than what they are paying in interest. The Federal Government on the other hand IS spending money it doesn't have. They aren't investing that money by loaning it back out...they are spending it and it's gone...yet they still owe that money plus interest from the people that have bought Treasury notes. If a bank attempted to do what the Federal Government does they would be out of business in short order and it's officers would be facing jail time.

Our monetary system in the US is one in which the the FED issues most public sector supplied money in the form of FRNs and bank reserves. This is money originating outside of the domestic private sector, commonly referred to as HPM (High Powered Money) or Base Money.

Secondly, there's no such thing as the government having to borrow or receive tax receipts to spend under our fiat system. Government spending/money creation is nothing more than a balance sheet operation whereby the government spends and lends by changing numbers in a bank account.

Here's another critical concept to understand: the federal government doesn't have or not have dollars. Think about it as a football stadium. The Giants score a touchdown and conversion to throw seven points on the board. After the conversion, it's an additional one point on the scoreboard. Does anyone wonder where the stadium got that extra point? What about if they score a field goal? Do we scratch our heads and wonder where the stadium go those extra three points? Do you think stadiums should keep 'reserve points' or have a point lock box? Of course not, that's silly. The federal government is like the stadium, which doesn't have or not have points to give out. When it comes to the US Dollar, the federal government, working through the Treasury and FED, is the score keeper. They also get to make the rules. There's a huge difference between spending the currency you create and spending the currency someone else creates.

Lastly, contrary to what we learned in college, banks don't lend out or multiply their reserve balances, although they do lend out money for profit over the cost of reserves. Loans effectively create new deposits ex-nihilo. Also, since the majority of money in the US monetary system tends to be credit based, the changing nature of this spread can have a tremendous impact on the supply and demand of credit and the economy as a whole.

 

[Kimura]

dear, do you think inflation is a thing of the past or something? There are plenty of people around like Bernie Sanders and paul Krugman who are only concerned with the employment part of the mandate!!

No country has ever had a comparable increase in the size of its portfolio and unwound it &#8220;in the precisely analogous way,&#8221; Bernanke said in response to questions from members of the House Financial Services Committee. Japan was the only nation to use asset purchases, or quantitative easing, before the U.S. and is &#8220;still in that situation,&#8221; he said.

Well, that makes sense, since unemployment is far more serious than some inflation, which I went into like ten different times. And yes, I read the transcripts, but people fail to realize multiple factors, such as that these things can be unwound over a period of 3-12 years if need be. The FED simply created bank reserves to accomplish these LSAPs, so I don't see a problem going forward.

you don't but Bernanke does becuase the situation is 100% new. To say there is no problem is pure ignorance as if to say the problems of central banking are behind us. How stupid when we just had a near depression and total collapse 5 years ago!!

It looks like I'm not the only one familiar with Hyman Minsky:

Bank leverage cycles

Galo Nuño, Carlos Thomas, 12 March 2013

Economists tend to agree that explosive deleveraging in the banking sector was a central element of the 2008 global financial crisis. This column argues that such deleveraging is far from unique. In fact, there is a &#8216;bank leverage cycle&#8217; in which bank leverage, assets and GDP ramp up and down together; and this is true across financial subsectors. Such procyclicality strengthens the case for macroprudential regulations.

Read the rest:
Bank Leverage Cycles | Vox

 

[Oldstyle]

Again, with this 'printing money' meme. We're under a fiat system, a non-convertible currency, which means taxes effectively drive money. Under our system, all government spending is inherently money printing.



The US government doesn't have to borrow that which it creates. This is another misconception. Government spending precedes taxation and borrowing, so the government simply taxes and borrows what it has already spent so to speak. I used the example about the Chinese or OPEC countries purchasing Treasuries. In order to purchase Treasuries, foreign countries or you or I have to use dollars, correct? Well....where did those dollars come from? The government has to spend them into existence at some point which is where deficit spending comes into play. Deficit spending creates net financial assets.



There fundamentally isn't a difference between a US Treasury and savings account. You deposit dollars, you are given back the principal plus accrued interest. Governments, such as the US, which is the monopoly issuer of the currency, doesn't have to borrow from anyone. From a monetary standpoint, this makes absolutely zero sense, given that we're off the gold standard. These are myths which are largely promulgated by right wing ideologues or grossly or willfully misinformed media pundits. You can print out my posts and bring them to the most hardcore, right wing economist on earth and they will grudgingly admit that I'm correct from the monetary side of things.

You just pointed out the difference! A bank isn't spending money it doesn't have. It's taking the money that is deposited into savings accounts and loaning that money out at a higher rate than what they are paying in interest. The Federal Government on the other hand IS spending money it doesn't have. They aren't investing that money by loaning it back out...they are spending it and it's gone...yet they still owe that money plus interest from the people that have bought Treasury notes. If a bank attempted to do what the Federal Government does they would be out of business in short order and it's officers would be facing jail time.

Our monetary system in the US is one in which the the FED issues most public sector supplied money in the form of FRNs and bank reserves. This is money originating outside of the domestic private sector, commonly referred to as HPM (High Powered Money) or Base Money.

Secondly, there's no such thing as the government having to borrow or receive tax receipts to spend under our fiat system. Government spending/money creation is nothing more than a balance sheet operation whereby the government spends and lends by changing numbers in a bank account.

Here's another critical concept to understand: the federal government doesn't have or not have dollars. Think about it as a football stadium. The Giants score a touchdown and conversion to throw seven points on the board. After the conversion, it's an additional one point on the scoreboard. Does anyone wonder where the stadium got that extra point? What about if they score a field goal? Do we scratch our heads and wonder where the stadium go those extra three points? Do you think stadiums should keep 'reserve points' or have a point lock box? Of course not, that's silly. The federal government is like the stadium, which doesn't have or not have points to give out. When it comes to the US Dollar, the federal government, working through the Treasury and FED, is the score keeper. They also get to make the rules. There's a huge difference between spending the currency you create and spending the currency someone else creates.

Lastly, contrary to what we learned in college, banks don't lend out or multiply their reserve balances, although they do lend out money for profit over the cost of reserves. Loans effectively create new deposits ex-nihilo. Also, since the majority of money in the US monetary system tends to be credit based, the changing nature of this spread can have a tremendous impact on the supply and demand of credit and the economy as a whole.

The US Government is a football stadium and gives out points? Dude, that's one of the dumbest analogies I've ever heard. I hope for your sake you smoked a fattie before coming up with that nonsense because if that's you operating normally then all I can say is that you have my sympathy.

 

[Kimura]

You just pointed out the difference! A bank isn't spending money it doesn't have. It's taking the money that is deposited into savings accounts and loaning that money out at a higher rate than what they are paying in interest. The Federal Government on the other hand IS spending money it doesn't have. They aren't investing that money by loaning it back out...they are spending it and it's gone...yet they still owe that money plus interest from the people that have bought Treasury notes. If a bank attempted to do what the Federal Government does they would be out of business in short order and it's officers would be facing jail time.

Our monetary system in the US is one in which the the FED issues most public sector supplied money in the form of FRNs and bank reserves. This is money originating outside of the domestic private sector, commonly referred to as HPM (High Powered Money) or Base Money.

Secondly, there's no such thing as the government having to borrow or receive tax receipts to spend under our fiat system. Government spending/money creation is nothing more than a balance sheet operation whereby the government spends and lends by changing numbers in a bank account.

Here's another critical concept to understand: the federal government doesn't have or not have dollars. Think about it as a football stadium. The Giants score a touchdown and conversion to throw seven points on the board. After the conversion, it's an additional one point on the scoreboard. Does anyone wonder where the stadium got that extra point? What about if they score a field goal? Do we scratch our heads and wonder where the stadium go those extra three points? Do you think stadiums should keep 'reserve points' or have a point lock box? Of course not, that's silly. The federal government is like the stadium, which doesn't have or not have points to give out. When it comes to the US Dollar, the federal government, working through the Treasury and FED, is the score keeper. They also get to make the rules. There's a huge difference between spending the currency you create and spending the currency someone else creates.

Lastly, contrary to what we learned in college, banks don't lend out or multiply their reserve balances, although they do lend out money for profit over the cost of reserves. Loans effectively create new deposits ex-nihilo. Also, since the majority of money in the US monetary system tends to be credit based, the changing nature of this spread can have a tremendous impact on the supply and demand of credit and the economy as a whole.

The US Government is a football stadium and gives out points? Dude, that's one of the dumbest analogies I've ever heard. I hope for your sake you smoked a fattie before coming up with that nonsense because if that's you operating normally then all I can say is that you have my sympathy.

Yes, to point out that the federal government doesn't have or not have dollars. I'm also trying to help you understand monetary operations through some basic examples. You clearly have been spoon fed misinformation and outright lies about our monetary system. Who told you these things? I'm not being a douche, I'm genuinely curious as to who told you this. I expect this from our political class, such as the Pauls, Paul Ryan or even Obama, because they're ideologues and are have an agenda.